Terry McBride Explains How Nettwerk Puts Fans In Control

from the consumer-models,-not-business-models dept

Mark Glaser has an absolute must-read interview with music label Nettwerk's CEO Terry McBride. Nettwerk, of course, has been one of a few record labels that really understands how the market has been changing, and has moved aggressively to take advantage of that. The label, which represents some top artists like Coldplay, Barenaked Ladies, K-OS and Avril Lavigne, got a lot of press a couple years back when it agreed to pay for the defense of some folks who were sued by the RIAA for file sharing. But, much more interesting was how it was actively embracing the changing market while other record labels were trying to hold back the tide. I don't agree with everything McBride has to say, but he's a lot closer to understanding where the music market is heading than pretty much everyone else we've seen in the recording industry.

You should really read the entire interview, but a few highlights are things like where he points out that musicians and record labels should be selling the overall brand, not the music:

In the digital space, where you don't need to buy shelf space, if you create the right metadata behind what you're doing, and market it in an effective way -- you're not marketing the new album, you're marketing the brand.... Chad [Urmston of State Radio] just played to 2,800 people with a $25 ticket price in New York on the weekend. He's marketing a brand, he's not just marketing intellectual property. Now it all makes sense. He's happy, he owns his future, his audience has grown with him really well.

Which brings up the second key theme: growing the audience and having them connect more closely with the musicians, even to the point of having some say in what direction the band goes in. For example, he talks about originally letting fans design the t-shirts the bands would sell. While some band members didn't like the fan-designed shirts, they inevitably sold more than the band-designed shirts. So, they started taking that even further: releasing versions of the bands' music online for fans to remix. And, with the latest K-OS album, even releasing all the musical stems for remixing, months before the actual album is released, with a plan to then release both the artist mix and the best fan mixes as both physical and digital offerings:

You can even take it beyond that. With K-OS, we're thinking about having the audience vote on which 10 to 12 cities he plays in Canada. We might even take it one step further: pay as you go not as you enter. And maybe when you leave you get a copy of the fan mix for your donation, so there's karma pricing on the exit.

McBride also talks about where he thinks this is all going to end up, and he discusses a model that might sound sort of like the music tax we've been slamming, but in reality it's quite different:

To me, the future of music is really simple. It's cloud-based servers that have all of the music, TV, movies -- whatever it might be. Very rich application-driven PDAs, whether it's the iPhone or whatever else comes up, that has applications that I have yet to see. Like digital maids or valets, which go out and knows what your musical tastes are and your 20 friends, and finds that music and organizes it -- not the actual music but the metadata so you can pull it when and how you want it. You would have a $5 or $10 per month fee for pulling it down. And that's how it will all end up, because business cannot drive business consumption.

How free loses out is the applications and metadata that makes it really easy. I call it the "hassle factor" -- for $5 to $10 you get all the music you want without the pain of having to find it. So you get the new Killers album without even knowing the new Killers album is out, and it's automatically in your weekend listening folder because your digital valet got it for you. And if you want to know what your buddy Ken's listening to, then the valet checks out his playlist and copies it over for you.

I could see this happening to some extent. The difference between this and a music tax is (a) it's totally voluntary (b) it's about adding value beyond "free" that makes it worth paying and (c) what you're really paying for is actual scarcities: convenience and pointers to good music you'll really like. Of course, in the end, my guess is that eventually this would go one step further, where the service itself would be free, because musicians would find so many other benefits from being promoted through such a system (increased ticket sales, fan club subscriptions, etc...) that it would make even more sense for the whole system to be free.

Anyway, it's great to see real progress being made on business models in the industry, and this actually highlights (once again) why Warner Music/Jim Griffin's music license system just isn't necessary. The market is making things work without it. In fact, the key quote from McBride may highlight why Nettwerk is getting somewhere while so many of the old school labels are having trouble:

It's a business model and not a consumer model. And it's definitely not a psychological model. This is about monetizing consumer behavior and not about trying to control where they go.

He's talking specifically about "ad-supported" music, which I agree is a model that will never get very far, but the same thing pretty much applies to the old record label model, as well. These days, when there are real consumer options out there, you don't succeed by limiting what consumers do, you succeed by enabling them to do more. And, that seems to be exactly what Nettwerk is doing.

Reader Comments

As much as you would probably like new distribution models to be embraced with all deliberate speed, I am sure you will agree that movement of the content industry in that direction will happen in "baby steps" over an extended period of time. It is not easy to change many, many years of history that predate the widespread use of the internet.

I do believe, however, that even after adoption of new models copyright law will continue to retain vitality...though, perhaps, its enforcement will be applied more judiciously than is now the case. Moreover, even if by some miracle copyright law was stricken tomorrow, contract law would quickly move in to fill the void.

Re: Baby Steps

As much as you would probably like new distribution models to be embraced with all deliberate speed, I am sure you will agree that movement of the content industry in that direction will happen in "baby steps" over an extended period of time. It is not easy to change many, many years of history that predate the widespread use of the internet.

That's not how competition works. Those who are quicker to adapt will be more successful, and those who are slower will lose out, get left behind, and in general end up as money-losing casualties. Or maybe they'll go to the Government for bailout money...

Re:Re:Re:Baby Steps

"In a perfect world "yes", but we do not live in such a world. Business is driven by money, and right now it is the "big boys" who hold it."

The big labels still have a large chunk of money to throw around, no doubt about it. But as thier intransience causes thier profits to plummet and smaller companies who embrace the new models profits rise, change is inevitable. It's really all over now except for the screaming, though the screaming could last quite awhile yet.

It doesn't even really matter how much legislation the big labels buy now. For every law they buy somebody is sitting at home thinking how to get around it. For every security measure they take somebody is actively programing a way through it. They have made active and technologically proficient enemies in the youth of the world, and now, they see the profit in that.

Convenience Model might work

The convenience model might work if it was really well done. It would have to constantly be improving in order to stay ahead of free.

In order for the convenience model to work you would need to have *ALL* the music or media available. That is not going to happen unless either the music industry changes or there is a draconian change in IP laws.

Re:

Yes, but an argument is that convenience will be valued by legitimate users.

But at second glance, this strategy may have appeal to the illegitimate users too. By tying into scare goods such as voting for concert cities, and t-shirt sales (Sorry, could't resist), there's opportunity for the fan to become involved on a more intimate level. The ability to get fans involved, excited about the artists, can be a conversion, and conversation opportunity if thought about carefully.

This could turn out to be a great idea.

Another person mentioned Zune. The idea kinda works, but it's not convenient because Zune lacks critical mass in the area of hardware and values a $200 hardware investment over growing fanbase.

I have no first hand knowledge, but it seems that their A&R/Talent process focuses on true growth of their artist, and they seem to turn their back on manufactured art- groups like Barenaked Ladies or Dave Matthews haven't put out a CD in years are still able to play full concerts. It seems they have developed an A&R team that can identify good art, outside of the comp'ed rooms, drinks and promises.

So the strategy is a definite strength for Nettwerk. I will continue to support them. Many of my well-worn CDs are Nettwerk.

Zune Marketplace with the Zune pass accomplishes much of this. I've been using the "Billboard Chart Hits" Collection for a while and it automatically syncs up the songs whenever i plug in. Quite an enjoyable experience, all the songs I want for only 14.99 a month. Could be a little better, but I'm happy with it.

Re:

That's basically the same idea, except 2 things:

1: it's probably tied to the zune
and 2: it's not the playlists from other people letting you get their music without having to purchase it. It's different when a company makes the list vs your friends, as we don't want to yuck up to a corporations "we think we know best" list.

See, if the record company did what this Terry McBride has in mind, I have a feeling a ton of people would go for it. In reality, the music industry as a whole would make a TON more than they would off their current model (think of if every family in the US paid into this 10$ a month deal? - hell - allow it to be used in satellite radio as well and suddenly you've even got multiple industries yet again).

Let me and my friends share music openly and with eachother and playlists and such, and you'd probably have the whole planet on board relatively fast. It's really the same tenets we've been asking for the whole time: any music, any where, any device, with anyone. Of course, I bet big business would want this to be 50-70$/month or something.

Netflix Problem

While having great ideas, I still see one major problem with the 'digital valets' in the article: taste. It's the same problem Netflix is trying to surmount with it's algorithm contest; it is (currently) extraordinarily hard for a computer program to pick out exactly what a person might or might not like. Last.fm is a good example of algorithms going the right way, but for something as subjective as music the possibility of someone missing a mindblowing musical experience due to some minor detail in a program is very real. If the algorithms of the future can really deliver that, then that's when the money will really start flowing in.

Terry McBride Explains How Nettwerk Puts Fans In Control

Nettwerk label's Terry McBride has always been a forward thinker and this article is the perfect example of how his tactics 'mesh' with the emerging age of music. Giving the fans what they want has always been a motto of advertising pundits, but we can all agree that there are very few labels doing so, much less one as major as Nettwerk. Indie artists can learn a lot from Terry, integrating his tactics into your own personalized marketing strategy.

Spot On

"growing the audience and having them connect more closely with the musicians" this is all about promoting ourselves (the artists) we want the fans to fall in love with the personalities this way they will last longer.
Mike
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